Canada: Canada Relaxes Iran Sanctions - Making It Easier To Do Business With Iran

Last Updated: February 15 2016
Article by Brenda C. Swick, Bruce C. Thelen and Daniel D. Ujczo

On February 5, 2016, Canada significantly reduced its unilateral economic sanctions against Iran by introducing amendments (Amendments) to the Special Economic Measures (Iran) Regulations (Iran Regulations). The relaxation follows the International Atomic Energy Agency's announcement in January that Iran has taken all measures laid out in the Joint Comprehensive Plan of Action (JCPOA) to ensure that Iran's nuclear programme is entirely peaceful in nature.

Canada's announcement follows Bombardier's loss to Airbus, which recently signed two agreements with Iran covering new aircraft orders and a comprehensive civil aviation co-operation package. But, with the liberalization of the Iran sanctions, Canadian companies, including those in the oil and gas services, automotive, agri-food, construction, mining, aerospace, food and consumer products, financial services and technology sectors should be reviewing the emerging opportunities in Iran.

The relaxation of Canadian sanctions presents Canadian companies with many opportunities to do business in Iran across a broad range of sectors. At the same time, it is important to be cognizant and mitigate the risk associated with the economic sanctions and export controls that remain in place.

Background on Canadian Economic Sanctions Against Iran

Canada has imposed two types of regimes against Iran in response to Iran's nuclear and WMD programs. The first are unilateral sanctions imposed only by Canada under the Special Economic Measures Act referred to as the Iran Regulations, which have now been substantially lifted. The second are multilateral sanctions imposed by all U.N. member countries including Canada to implement the U.N. Security Council Resolutions placing embargoes and restrictions on Iran's proliferation-sensitive nuclear and ballistic missile programs.

Amendments to the Iran Regulations

Relaxation of General Prohibition against Dealings with Designated Persons

Section 3 of the Iran Regulations previously prohibited Canadian companies and individuals from engaging in a wide range of dealings with a list of 530 "designated" entities and 83 "designated" individuals associated with Iran's proliferation of sensitive nuclear activities or the development of chemical, biological or nuclear weapons.

The amendments significantly reduce these restrictions. The term "designated" has been eliminated, and the amendments now impose prohibitions against only 161 listed persons and 41 listed entities that continue to have associations with the Islamic Revolutionary Guard Corps.

The Amendments continue to prohibit Canadians and persons in Canada from (a) dealing in any property, wherever situated, that is owned, held or controlled by a listed person or by a person acting on their behalf; (b) entering into or facilitating any transaction related to such a dealing; or (c) providing any financial or related service in respect of such a dealing. They also continue to prohibit Canadians from making any goods, wherever situated, available to a listed person or to a person acting on their behalf; or providing any financial or related service to such persons.

Relaxation of General Trade Embargo

The general trade ban in Section 4 of the Iran Regulations has been replaced with a much more targeted ban. Section 4(1) of the Iran Regulations previously prohibited any person in Canada or any Canadian outside of Canada from exporting, selling, supplying or shipping goods, wherever situated, to Iran, to a person in Iran, or to a person for the purposes of a business carried on in or operated from Iran. Section 4(3) also contained a comprehensive ban on the provision of "technical data" to Iran or any person in Iran required for the refining of oil or the liquefaction of natural gas, the production of petrochemicals, the building, maintenance or refitting of ships, the transportation or storage of crude oil or petroleum/petroleum products, drilling and mineral surveying and exploration or the processing, storing or handling of liquefied natural gas.

These prohibitions have been repealed. Canadians or persons in Canada are now prohibited from exporting, selling, supplying or shipping any of the goods listed in Schedule 2, wherever situated, to Iran, to a person in Iran, or to a person for the purposes of a business carried on in or operated from Iran. Canadians continue to be prohibited from transferring, providing or disclosing to Iran or any person in Iran any technical data related to the goods listed in Schedule 2 of the Amendments.

Schedule 2 includes items that are generally used in nuclear, biological and chemical weapons programs, including certain specialty metals, autoclaves, aerosol generators, compressors and vacuum pumps, electrical power supply units and transformers, fibrous or filamentary materials, frequency changers (inverters) and specially designed software for them, mass spectrometers, gamma-ray spectrometers, explosive release devices, and production equipment.

Additional Relaxations

Sections 4.1 to 8 of the Iran Regulations contained additional prohibitions and restrictions all of which have been repealed. Section 4.1(1) prohibited Canadians from importing, purchasing, acquiring, shipping or transshipping any goods that are exported, supplied or shipped from Iran, whether the goods originated in Iran or elsewhere. Section 4.1(2) prohibited Canadians from providing or acquiring marketing, financial or other services from or for the benefit of any person in Iran in respect of the import, purchase, acquisition or shipment of natural gas, crude oil, or any petroleum or petrochemical products, from Iran. Section 6 contained a sweeping ban prohibiting Canadians from "making an investment in an entity in Iran". Section 7 contained a broad prohibition against providing vessels owned or controlled by the Islamic Republic of Iran Shipping Lines with insurance and other operation and maintenance services; and a broad prohibition against providing any flagging or classification services to Iranian oil tanker or cargo vessels.

The Amendments replace all of these restrictions with a general prohibition against Canadians or persons in Canada doing anything that causes, facilitates or assists in any act or thing prohibited by the ban on dealings with listed persons or the revised trade embargo.

Export Controls Remain

Notwithstanding the relaxation of the sanctions regime, Canada will continue to enforce its controls under the Export and Import Permits Act on exports and transfers to Iran of goods, technical assistance and technologies which are considered sensitive from a national and international security perspective. Companies are reminded that all items on Canada's Export Control List (which includes goods, technology and technical assistance) require a permit from the Export Controls Division at Global Affairs Canada.

Also, applications for permits to export any goods or technologies covered under any of the following items on the Export Control List to Iran will generally be denied. This is because these are considered the most sensitive items from a national and international security perspective, and include nuclear goods and technologies, and goods and technologies that could assist the development of Iran's ballistic missiles program:

  • Group 1 (Dual-Use List)
    • Test, inspection, and production equipment for special materials and related equipment Intrusion equipment, systems and components
    • Telecommunications intercept, surveillance and jamming equipment, systems and components Optical sensors, high-speed instrumentation cameras, image intensifier cameras, focal plane array imaging cameras, lasers
  • All items in Group 2 (Munitions List); Group 3 (Nuclear Non-Proliferation List), Group 4 (Nuclear-Related Dual-Use List)
  • Group 5 (Miscellaneous Goods and Technology)
    • Blinding laser weapons
    • Nuclear fusion reactors
    • Antipersonnel mines
  • Group 6 (Missile Technology Control Regime List) – all items with prescribed exceptions for certain parts and components intended for civil aircraft
  • Group 7 (Chemical and Biological Weapons Non-Proliferation List) - Chemical Weapons Convention Materials P3 and P4 containment facilities Human toxins

A Word of Caution for Canadian Affiliates of U.S. Persons

Despite the publicity surrounding the implementation of the JCPOA, the United States embargo on Iran is largely unchanged. Any proposed transactions with Iran involving Canadian entities that are U.S owned or controlled must be evaluated with caution and with appropriate due diligence and awareness that strict compliance procedures will be required to avoid violations by U.S. persons.

United States sanctions regulations generally prohibit foreign entities owned or controlled by U.S. persons from engaging in any transaction that would be prohibited if engaged in by a U.S. person or in the United States. This will continue to carry substantial risk for corporate groups that include "U.S. persons", which includes not only U.S. citizens, but also permanent resident aliens, U.S. entities and their foreign branches, and even foreign persons while in the United States.

The U.S. regulations further prohibit transactions or conspiracies to evade or avoid any of the regulatory prohibitions. For example, U.S. persons are barred from approving, financing, facilitating, or guaranteeing any transaction by a foreign person that would be prohibited if performed in the United States or by a U.S. person. Among other things, prohibited facilitation or approval of a foreign person's transaction occurs when a U.S. person, in order to permit or facilitate a transaction that would be prohibited if performed by a U.S. person or from the United States, alters its operating policies or procedures or those of a foreign affiliate or when it refers Iranian purchase orders, bids and similar business opportunities to a foreign person.

Under the JCPOA, the United States agreed to lift nuclear-related sanctions, generally limited to so-called "secondary sanctions" that are directed toward non-U.S. persons for specified conduct involving Iran that occurs entirely outside the United States and does not involve any U.S. person. The lifted secondary sanctions include those affecting Iran's trade in precious metals and in some materials and software, and on Iran's ports operators and on its energy, petrochemical, automotive, shipping and shipbuilding sectors, as well as on related trade in financial, insurance and other associated services.

Primary sanctions relief is limited to three narrow categories. The United States took steps to allow exports and reexports to Iran for its commercial passenger aviation sector, as well as imports of Iranian-origin carpets and foodstuffs, including pistachios and caviar. And non-U.S. entities owned or controlled by a U.S. person were granted limited ability to engage in some transactions involving Iran that are consistent with the JCPOA and with U.S. laws and regulations. With the exception of these three categories, U.S. persons will continue to be broadly prohibited from engaging in transactions or dealings involving Iran or the Government of Iran.

The measures taken to grant limited authorization for U.S. owned or controlled foreign entities to engage in some transactions with Iran are outlined in General License H, issued by the Treasury Department's Office of Foreign Assets Control (OFAC). General License H permits a U.S. person to alter operating policies and procedures to accommodate permitted transactions and to make its automated, globally integrated communication and support systems available to foreign entities involved in permitted transactions, provided that the systems operate passively and without human intervention and are not used for any transfer of funds involving the U.S. financial system. Notably, the direct or indirect export, reexport, sale or supply of any goods, technology or services from the United States or by any U.S. person, wherever located, in connection with these transactions remains prohibited, effectively barring the supply of U.S. origin goods, technology or services directly to Iran or to third countries for incorporation into other items destined for Iran. General License H also expressly confirms that the prohibitions on facilitation by U.S. persons remain in effect except for the narrow exceptions under the license. This means that U.S. persons may not be involved in the ongoing Iran-related operations or decision making of a U.S. owned or controlled foreign entity.

The license also enumerates several categories of transactions that are not authorized for non-U.S. persons, such as funds transfers involving the U.S. financial system, transactions involving designated entities or persons or any Iranian military, paramilitary, intelligence or law enforcement entity, any sanctionable activity related to terrorism, Syria, Yemen, human rights abuse or weapons of mass destruction or their means of delivery, any activity involving unapproved nuclear procurement channels.

Nor have all other secondary sanctions been lifted. For example, non-U.S. persons remain subject to sanctions for transactions or support involving persons or entities on OFAC's List of Specially Designated Nationals and Blocked Persons. General License H also confirms that non-U.S. persons remain subject to the prohibition on the direct or indirect reexport to Iran from a third country of goods, technology or services of U.S. origin that are subject to export control license requirements if the non-U.S. person knows or has reason to know that the reexportation is intended specifically for Iran or the Government of Iran and the goods or technology constitute ten percent or more of the end product's total value. For this reason, these items continue to require a Canadian export permit, even though items containing U.S. content as provided in Item 5400 of Canada's Export Control List are not on the Denial List.

The International Trade Group at Dickinson Wright is monitoring the situation on both sides of the Canada-U.S. border and will provide regular updates as matters develop in this area.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Brenda C. Swick
Daniel D. Ujczo
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions